It was back in 2016 that I had made a post talking about my life insurance policies and how such policies were considered to be a bad decision by many economic people and I argued in favor of having the policies. I had said that at some unknown future point, my insurance would be free. Well, I was doing some account maintenance and review because of an upcoming significant life change and guess what? That time has come. I’m not going to go back in time and try to determine when I actually crossed that line, but I can say in 2021, I have made more in dividends than I have made in payments.
Here’s the actual numbers involved. I pay about $135/mo for my two insurance policies. So far in 2021, I’ve paid $945 in insurance premiums. Now I don’t regularly check the balance of my whole-life policy because it’s not something that really needs any attention. I’ve checked it three times this year and in those three times, the cash value of the account has grown $1433. If it’s not obvious, that number is larger than $945.
Insurance is a bill, an expense in your life. You should consider it lost money. Even more so because you’re not supposed to get any benefit out of it – it’s for other people. Not so with Whole Life policies, there is a cash value that you can access in retirement. Detractors say that whole life policies are savings accounts for people who can’t save, because the deposits are faked as a bill. So what! It works.
So if my dividends for the year were anything over $945, I am effectively in the black. And almost being 50% above my deposits, that is a decent return. So now that this goal has been met, let’s look a little harder at the big picture. This should make the naysayers feel more superior.
According to records, I have had my insurance policy since June, 2007. My payment has actually gone down a little bit as the years have gone by, but $135/mo is a fair average of what I’ve paid a month. So, how much have I paid to have insurance all those years? Looks like almost $23k. What is my current cash value of the account? A little over $17k. If I want to be slippery about this I could say I’ve effectively paid $6k for 14 years of insurance, which is about $35/mo. My $100k term life policy is like $16/mo, so I’ve been getting my whole life policy at term life rates.
But that whole discussion is just like dealing with percentages. It’s bullshit. Here’s the bottom line. I purchased insurance at a rate that was not a hardship for me. I’ve maintained that policy for 14 years. The policy is no longer an expense and is now an investment. It is behaving exactly how it was sold to me.
I do not believe whole-life policies are evil if they are crafted properly by a reputable company.
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